How To Help The Loan Go Smoother and Faster

It's easy to complain about how long it takes a loan to close - even loan officers do it. The truth is if everything is in order and the property is acceptable the loan should close within 21 to 30 days of the receipt of all documents by the lender. This is not 21 days from application date nor is it 21 days from contract date. It is exactly as stated: 21 to 30 days from the date a full application is received.

The tug-of-war between agents and loan officers can be turned around if both remember to stand on the same side of the mud puddle. Generally the agent needs to realize they do not know as much about the actual workings of the mortgage industry as the loan officer and the loan officer needs to realize the same and not leave the agent in the dark and don't use insider terms to explain everything. I understand Active Rain participating agents are more well informed than others because we all swim in this same pool!

Almost every loan application has some similar needs. If the agent knows what these are and can help prep the client to get these together quickly and accurately then the agent and the loan officer can start out by standing on the same side of the mud puddle and pulling the same direction on the rope. These are not absolutes and are not carved in stone but at least 9 of 10 loan applications need most of the following:

For W2 Employees

1. Two years of tax returns, all schedules, signed by the taxpayers. This will be verified by the IRS so go ahead and feel free to ask the home buyer if these are the same tax forms they sent to the IRS for those tax years.
2. Two months of bank statements all pages including blank ones - front and back (checking and savings if they are used on the application as assets). Look at the documents and find every page. If the first page says 1 of 15 we'll be looking for 15 pages.
   
3. One month's coverage of pay stubs showing deductions and year-to-date income. If they get paid weekly this would be four pay stubs. If they are paid bi-monthly this would be two pay stubs and so on. If they get paid by a handwritten check (like some small businesses do) we're going to have some challenges verifying income according to document requirements so brace for impact.
   
4. A clear photo-copy of a government issued ID (driver's license, passport) showing the current address. If the current home address is different than the address on the ID we may need a letter of explanation.
5. A clear copy of the social security cards. Photo copies are okay and scans are best.
6. A fully executed sales agreement signed by all parties and legible. If it has been faxed back and forth we cannot read the words or even the signatures. If your great-grandad cannot easily read the contract in low light it's not good enough. Send us the unexecuted (unsigned) contract along with the best possible signed copies.
7. If it is a condominium we need the condo questionnaire completed (you can get that from me or whoever your lender is - each lender has a different one) and insurance information.
8. We need the insurance information for the buyer's preferred home owner's agent.
9. If there is a gift of funds from an acceptable member (pretty much limited to a direct family member like a parent, child, sibling or spouse) we need a gift letter which you can get from the loan officer.
10. If the home buyers have not been in the same line of work for 2 years that could be an issue so be prepared to face that challenge.
11. If the home buyers have a gap of more than a couple of weeks between jobs a good letter of explanation will be needed.
12. If the home buyer is receiving Social Security Income or Disability we will need the award letter and it will need to be continuing for three years after the closing date.
13. If the home buyer does not have a checking account they need to go get one. It's very difficult to get a file closed for someone without a checking account.
14. If the home buyer has student loans which are deferred we need the letter of deferment and it needs to be good for at least the next 12 months.
15. If the home buyer is receiving maintenance from another person we need the court order and if it is for child support we need the birth certificate of the children. (We are not permitted by law to ask if the applicant wants to use child support as maintenance.)
16. If the buyer has another home and it is for sale we may need a copy of the listing agreement.
17. If the buyer recently sold a previous home and are using the proceeds for the down payment we need to see a copy of the HUD1 from that closing.
18. If the property is new construction we will likely need a termite free letter.
19. If the property is in a flood zone there is a brand new set of requirements.
20. If the property was purchased by the seller within the last 6 months and has increased in value more than 5% have the seller be prepared to show documented upgrades, repairs and other investments into the life and value of the property.

Seriously, this is a partial list. There may be this many things again especially if the buyer is self employed or a legal resident alien. If you are aware of these and the buyer and seller are aware of these and we work together to get them then at least the first 10% of the work required to get the loan into underwriting for approval has been addressed. There are at least this many items which are addressed by the lender which also have to be completed before the application can even be submitted to underwriting.

It may be that the lender will not need all of these documents but they will need most of them. How many times have you spoken with a loan officer and they said, "I'm still waiting on the ...." If that is one of the things on this list you should already have prepped the home buyer(s) to know they will need to supply these. The longer they take to get it in the longer the loan will take to get closed.